Why are entrepreneurs finding NYC so hard to resist?

City has key advantages in key industries, growing academic scene. Plus, it's New York!

Silicon Valley may still be the place for tech startups to grow and thrive, but that doesn't mean that it is the only place that entrepreneurs are setting up shop. New scenes are continually popping up, without the same amount of competition that Silicon Valley has, and which offer their own unique benefits for companies to find a home.

One of those place is obviously going to be New York City. With its huge, condensed population and reputation for being "the city that never sleeps," New York offers some key advantages over Silicon Valley, forging its own identity as a new ecosystem for tech start-ups. New York is leveraging its unique position as the finance capital of the world to become a challenger for Silicon Valley supremacy.

(Note: Vator is holding its second-ever Vator Splash NY in Manhattan on Dec. 5. We'll hear from top NY angels/investors on just what's happening in the NY startup scene. Register here. Thanks to our Champagne sponsors RRE Ventures and KPMG for helping to make this event happen.)

I spoke to some venture capitalists to get their perspective on how the startup scene is changing, what tech areas are strong and what will be coming for New York in the future.

How the tech sector is changing in New York

New York is, of course, known for being the financial capital of the world. As the home to Wall Street, Nasdaq, and the New York Stock Exchange, for a long time tech was not really on the city’s radar, despite the its massive amount of capital and population. Tech was mostly seen as a west coast thing, with New York focusing on other industries.

Over the last few years, though, with the emergence of e-commerce and consumer Internet startups, including Meetup, Gilt Groupe and Tumblr, which have been based in New York, tech is beginning to come out east.

As Chris Fralic, Partner at First Round Capital, told me, “A few years ago people would ask IF you could build a tech company in NYC. Now people ask if NYC is better than Silicon Valley or not.”

What is behind the emerging tech scene in New York?

The emergence of New York as a counterpoint to Silicon Valley seems to have as much to do with the other industries already established in the city as it does with the environment that the city has to offer.

New York is the home to a number of other industries, including advertising, fashion, financial services, media, and real estate. Now, with an emerging tech scene, New York is able to leverage its advantages in those key areas to “produce a combination of software applications that serve consumers and industry,” says Marc Michel, co-founding partner of  Metamorphic Ventures.

“New York is headquarters to those industries and companies have the ability to plug into the key companies in each industry from a customer perspective as well as tap into the deep knowledge reservoir within those industries,” says Michel.

Startups are choosing New York because it’s a fun place to be, Micah Rosenbloom, CEO of Novophage, said to me. It also has a growing pool of young talent that are coming out of New York’s academic scene.

Rosenbloom, who on the Board of Advisors for Cornell's Entrepreneurship Program, also points to a number of programs, at universities such as Columbia and Lerner, who are supporting and teaching entrepreneurship, as a key advantage for New York going forward.

As a result of these programs, New York will continue to churn out a number of entrepreneurs already based in the city.

But, more than anything else, what attracts people to New York City is, simply, that it is New York City, where there is a level of excitement and action that few places can match.

“New York is one of the most vibrant economies in the world.  It’s a huge advantage to work in a location where things are constantly changing and anything is possible. You’re also surrounded by large Fortune 500 companies, which can be great test clients for your products,” Jules Maltz, General Partner at Institutional Venture Partners, told me.

“Finally, New York is about resiliency, which is a key characteristic in successful startups.  We saw numerous stories of startups, like Yext, doing heroic things to keep their businesses running during Sandy. This is what being a startup is all about.”

What is next for the New York tech scene?

The future looks bright for the New York City tech scene. Besides the number of entrepanuers that will be coming out of its academic scene, there will also be a number of established tech companies setting up offices in the city, as Facebook, eBay , Microsoft and Google already have, says David Teten, Partner with ff Venture Capital.

“Both developments will lead to a larger pool of skilled tech professionals, current employees and future entrepreneurs,” he says.

Fralic told me something similar, that there are “thousands of folks who have worked at places like Google or Yahoo or AOL for years, and many of them are looking at joining startups.”

On top of that he points to a number of  “successful entrepreneurs who have made money and are now active angels investing back in the NYC ecosystem – people like Nat Turner and Zach Weinberg of Invite Media, and Mike and Kass Lazerow of Buddy Media.”

“We expect New York to continue to mature and diversify across industries. We also expect to see larger companies like Twitter and Google establishing permanent offices in New York. Silicon Valley will still be the #1 technology market in the world, but New York has a real shot to be a strong #2,” says Maltz.

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